MPs: PwC promoted tax avoidance ‘on industrial scale’

In a report on the role of large accountancy firms in tax avoidance by the Public accounts committee, PwC is accused of helping hundreds of clients avoid corporation tax by setting up bases in Luxembourg.

Public accounts committee chair Margaret Hodge says: “It is only right that companies pay their fair share of tax according to the profits they make from their economic activity in the countries in which they do business.

“We believe that PwC’s activities represent nothing short of the promotion of tax avoidance on an industrial scale.

“Contrary to its denials, the tax arrangements PwC promotes, based on artificially diverting profits to Luxembourg through intra-company loans, bear all the characteristics of a mass-marketed tax avoidance scheme.”

The report says that in November, journalists disclosed 548 letters between PwC and the Luxembourg tax authorities, relating to 343 of the firm’s multinational clients.

Hodge says evidence given to the committee by PwC in January 2013 was “misleading”, including its assertions that “we are not in the business of selling schemes” and “we do not mass-market tax products”.

Hodge argues that HM Revenue & Customs needs to do more to challenge the advice being given by accountancy firms to their clients, and should introduce a new code of conduct for all tax advisers.

She says: “Unless HMRC takes urgent action, this irresponsible activity will go unchecked, causing harm to both the public finances and the reputations of the companies involved.”

In a statement, PwC says: “We stand by the evidence we gave the Public accounts committee and disagree with its conclusions about the work we do.

“But we recognise we need to do more to explain the positive role we play in the tax system and in helping businesses to operate successfully. We agree the tax system is too complex.”

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24th May 201912:17 pm

Comments

There are 11 comments at the moment, we would love to hear your opinion too.

The fault really lies with the politicians who make the tax law. The sheer complexity is what creates these issues, not the firms who work the law to their advantage.

So why not just change the law? Because there are some powerful vested interests, not least the firms that benefit from these schemes and the firms that makes hundreds of millions out of advising them. A simple tax system would also require less civil servants to collect it. Far easier to make the right noises and blame someone else.

How many scandals do we have to have within the accountancy profession before regulations change? After all we have had Enron, the banking crisis which was the result of poor or non existing auditing standards and now we have systematic and deliberate tax avoidance or should I say in some circumstances evasion.

Nobody likes paying tax but it is about time that accountancy practices were forced to act not only on behalf of the customer but also on behalf of the revenue, particularly the big four. As we have seen in the banking world, multi-billion fines for not adhering to the tax code may make these firms think twice before coming up with artificial structures like Eclipse 35 and others.

It is interesting that the accountants behind these schemes claim that they were legal at the time of being created but when you push them for the letters that they claim that they have from the revenue, they never seem to be forthcoming.

Evasion is illegal, avoidance is not. So just what is Ms. Hodge complaining about ~ the rules or the fact that PWC is very good at (legally) exploiting them? If you don’t like the rules, then change them, but don’t lambast firms like PWC for helping their clients take maximum advantage of them as they stand.

Agree with Julian Stevens here tax avoidance isn’t illegal. As for tax evasion I do hope that all higher rate tax payers have detailed any interest earned in bank accounts on their tax returns because that would be tax evasion – which is illegal.

This government has got into a habit of naming and shaming legal tax avoidance (jimmy Carr in entertainment world), a bit naughty. Change the rules if you don’t like them, it is in their power, they are the government. Argably they wouldn’t be doing their job if they don’t.

This is a huge issue but I can’t see how blaming PwC helps. It is their job to provide tax efficient solutions within the law.

The problem is the EU free trade agreement which means every time I buy a product from Amazon I am buying from a trader in Luxemburg. It doesn’t seem to matter that the product has never been anywhere near Luxemburg. Article 34 TFEU prohibits quantitative restrictions on imports but it seems that the definition of “import” is being interpreted very loosely indeed.

What is needed is an EU resolution to restrict imports in Art 34 to genuine imports only but that is hard to achieve, not least because Luxemburg and Ireland do very nicely out of the arrangements.

Margaret Hodge’s family company pays just 0.01pc tax on £2.1bn of business generated in the UK.

Analysis of Stemcor’s latest accounts show that the business paid tax of just £163,000 on revenues of more than £2.1bn in 2011.Stemcor’s tax bill to the exchequer equates to just 0.01pc of the revenues it booked through its UK-based business. In accounts filed with Companies House, Stemcor revealed that despite generating about one third of its revenues in Britain, its UK tax contribution made up only 2.7pc of the tax the company paid globally.

Stemcor was founded by Mrs Hodge’s father Hans Oppenheimer more than 60 years ago. The majority of Stemcor’s shares are still controlled by the Oppenheimer family and Mrs Hodge declares a “registrable shareholding” in the company, which is run by her brother Ralph Oppenheimer, executive chairman.

However, when recently pressed about the details of why so little tax was paid by Stemcor despite the billions of pounds it makes, Ms Hodge said that she had not done “enough detailed work” and did not have the information.’

You may also be interested to research her earlier career whilst at Islington Council and the connections to P.I.E.

Margaret Hodge has absolutely no credibility and spouts hysterical drivel.

I am inclined to agree with Peter Herd on this one, but I do understand Julian and Keith’s points above and agree that it is for politicians to change the rules in UK and Brussels as well as highlighting the companies who are aggressively promoting and pursuing what are currently legal loopholes.
I do not dispute their legality, but as Smithy says it does seem that only large firms can afford to argue with HMRC.
A lot of the aggressive Financial Planning is promoted by solicitors and accountants who may be technically right and so for large firms it is worth arguing the case, but access to that argument can cost more in legal fees than a small firm can afford.

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